Sunday, October 7, 2007

Worrying developments in water and health sectors

post by hasri hamzah

Concern is growing that private sector interests will soon dominate the country’s water and health care sectors and burden the public — despite official assurances that these sectors will not be privatised.

Concern is growing that private sector interests will soon dominate the country’s water and health care sectors and burden the public — despite official assurances that these sectors will not be privatised.

The government is revamping the way these two sectors are managed and financed. And the coming months will be crucial as blueprints and enabling laws are formulated.

Last June, the minister for water, Lim Keng Yaik, said the government had made a U-turn and decided that total privatisation was not suitable for Malaysia, “so we have cut out the word ‘privatisation’ ”.

Likewise, top Health Ministry officials repeatedly assured the public that there would be no privatisation of the proposed national health care financing mechanism, which would allow the government to collect health insurance premiums from the public.

The government may be avoiding the term ‘privatisation’, but concerned Malaysians are worried that the end results of its convoluted plans may be similar.

Two draft bills — the Water Services Industry Act (WSIA) bill and the National Water Services Commission (SPAN in Malay) bill — are expected to come into force later this year.

Water will be brought under federal control (away from state control) and most likely privatised after that. Tariffs are likely to rise significantly. Private water supply operators will no longer be supervised by the respective state authorities. Instead, SPAN will monitor the operators after renegotiating their existing concession agreements.

A new national water assets holding company (WAHCO) will be set up to buy up all existing water infrastructure. WAHCO, to be owned by the Finance Ministry, will raise low-interest funds to finance the acquisition and building of new infrastructure, which will then be leased to state-owned or private operators.

Already, Johor, Selangor and Kuala Lumpur have privatised their water supply management. Another four states — Malacca, Negri Sembilan, Pahang and Perak — have indicated they are going ahead with water privatisation. The remaining states will be required to “corporatise” their respective water authorities.

In the case of health, several moves since December 2004 to get patients to pay more for services clearly reveal the government’s ‘neo-liberal’ mindset. These include plans to privatise government hospital dispensaries and to make foreigners, including migrant workers, pay much higher ‘first-class’ rates at government hospitals. The government also announced a federal budget strategy to put greater focus on ‘health tourism’.

More recently, the authorities have given the green light for specialists to provide ‘private treatment’ at government hospitals to supplement their relatively low incomes — instead of increasing health budget allocations so that government doctors can be paid more.

There is certainly a lack of transparency. In health care, the authorities are believed to have short-listed consultants who will come up with a detailed blueprint for the national health care financing mechanism. Unfortunately, the Economic Planning Unit says it cannot release the terms of reference for the consultants because it is “confidential”.

This lack of transparency has done little to allay the fears of the Coalition Against Health Care Privatisation (CAHP). If the authorities can be so lacking in transparency over the terms of reference, what more when it comes to how the money in the health fund is eventually spent.

As for water, the public remains in the dark over the concession agreements with private water operators. The Coalition Against Water Privatisation (CAWP) is also concerned about the private operators' requests for water tariff hikes based on their claims of successful reductions of leakages (non-revenue water or NRW) — achieved by replacing old pipes. These requests could end up being approved without thorough independent verification of the claimed NRW reduction.

In both water and health care, civil society groups are concerned about how the huge amounts of funds to be raised will be spent. The health fund is expected to handle RM 13 billion annually while WAHCO will handle billions more - and both could turn out to be potential goldmines for corporate players.

Which of the so-called “stakeholders” — corporate players or the public — will benefit the most? At a meeting with senior Health Ministry officials, CAHP representatives argued that the term ‘stakeholders’ itself misrepresents the situation as not all stakeholders are equal. “The needs of the one stakeholder — the people - should be the main determinant of any future health scheme,” they said.

Adequate civil society oversight of SPAN and the national health fund will therefore be vital.

The Health Ministry said that it will closely monitor the proposed National Health Financing Authority, which will manage the national health fund. This authority “will function as a non-profit organisation and will not be privatised,” Health Ministry director-general Ismail Merican told CAHP in a letter.

But this authority may outsource a range of services and become just a paymaster for the national health fund — collecting premiums from the public and making payments out of the fund to the various service providers, including private hospitals. The question is: will there be open tenders for contracts of services and other payments out of the fund? Who will benefit most?

As for water, some have observed that it is ironic that private water operators would benefit from the low-interest funds raised by state-owned WAHCO. Why couldn't the government have raised such low-cost funds for the state water authorities in the first place, asks CAWP. The terms of the lease between WAHCO and the private operators will now be crucial in determining whether the interests of the public are protected.

We need to be vigilant because the track record of privatisation in Malaysia has been dismal. What has happened in the past is that profits are often privatised while losses are socialised (borne by the public).